Purplebricks: Disrupting UK Real Estate Agencies

Let’s say it’s pre-internet, 1990 and I’m selling my £200,000 house. What was that old process?

The research phase of estate agency pre-internet was very different. There were two elements to that research phase: what and where am I going to buy; and what am I going to get for my money? That was a very labor intensive journey of trawling through print, either newspaper or property magazines and travelling to estate agents, building relationships, getting yourself on mailing lists and it was quite hard work to understand the available inventory in estate agency in the UK.

Then the second side was, what’s the best route for me to sell my own property? Typically, three or four valuations from estate agents, lots of challenging questions to understand the dynamic. It’s slightly different today but people generally only moved every seven or eight years back in the 90s. It’s a little bit longer now, it’s 11 or 12 years, but it’s still the same sort of emotional decision-making process that you went through in terms of, am I going to sell my own home if I put it up for sale? Am I going to get a price? How am I going to be able to find somewhere to move to? I don’t really know what’s going on here; how do I build a relationship with an estate agent that I can trust?

That’s why it was very common for the estate agent that you found a house with to be the one that sold your property, and it became particularly relevant to build really good relationships focused on the human factor involved in the transaction. Estate agency, certainly in the 80s and 90s, was about personalities and people that had the skills to develop relationships and trust quickly and give consumers the confidence that they were the best people to represent them in a transaction, that was pretty significant in their financial life, but also something that wasn’t particularly common.

If I was selling my house, I would go down the street, find the estate agent branch, try and build a relationship with the agent and trust him or her enough to list and sell my property?

Correct, yes. Typically, you were out looking for a property and, in the process of looking for a property, you connected with an estate agent that just dealt with you in a way that you were comfortable with and, therefore, became the agent you chose to sell your house.

How would you look at the core responsibilities of the agent back then?

I think the hand-holding and educational element that was required back then was a very significant part of how estate agents won in the 90s. If your arena to compete and to be a serious player within the market was defined by anything, it was defined by your ability to engage with customers more often, more effectively and more meaningfully than your competitors.

Was it a typical journey where the agent would win the relationship, list the home in print channels and then the branch network would deal with all the back-office process and admin work?

Yes, pretty much. It was much more reliant on the telephone and a paper driven CRM approach. I showed somebody around a £200,000 house yesterday; they didn’t like it because the garden was too small and your £200,000 house that comes to market today has got a bigger garden. That’s the human intervention that can connect those two events together. Doing that well in the 90s was absolutely the difference between success and failure.

Was that hand-holding really crucial because there was a lack of information in the market or just because humans are very emotional around such a big purchase, anyway?

It’s difficult to comprehend but there wasn’t a single, aggregated view that you could look at. Even as the estate agent, if I’m coming to value your property today, I go on to the agent tools that sit behind Rightmove, that sit behind Zoopla. They give me really clever, powerful and illustrative comparison reports that I can take with me and I can sit down with you and say, here’s the report, it’s got properties like yours that have been sold. It’s got properties like yours that came to market that didn’t sell. We can see the length of time here that they’ve taken to find a buyer and, therefore, I can advise you with some really solid facts as to what is the right route for you, based upon your circumstances.

You go back to the 90s, we used to pay £100 a quarter for somebody to bring in an alphabetical, road-by-road printout, of all the properties that had been on the market the previous three months. So if you were going to value 27 Acacia Avenue, you went through that printout to see if it had been on the market. You couldn’t take it with you to go and show the owner, but at least you knew that number 27 had got three bedrooms and it was on the market in 1992 for £x.

That ability to have to hand genuinely interesting and trusted information for the consumer was very different. So yes, there was a genuine attempt to educate the vendor and, therefore, you needed to build trust and you needed to spend time and establish who were the people that you could win with.

The marketplace was different, as well, for most of the 90s where it wasn’t unusual for an estate agency branch to have 150 to 200 properties on their available register. Typical inventory today in the UK is 32 properties per branch, so a very different experience but very different for both the consumer as well as the agent.

Why is there such a big decline in properties per branch?

Partially it’s different because estate agency fees have gone up, so the estate agency business model can handle fewer properties to be profitable. It’s also partly different because those branch relationships aren’t so important and the physical locations aren’t as important as they used to be. Because you’ve got that aggregated view on Rightmove, the consumer can now sit in their own living room on the sofa at night-time and see every single property that’s up for sale, so the role of the estate agent is easier to replicate. The barriers to entry are far less and, therefore, the independent estate agent is on the rise. That means there’s fewer properties per estate agency branch.

If you can imagine, as a consumer, you could go to an estate agent that’s got 100 properties and you tell them that you want a three-bedroom semi, they’ve probably got half a dozen properties that you can choose from. Now, if you go to an estate agent and say, what have you got that’s three bedrooms, you might only have one or two properties that they’ve got available for you to look at. It’s not just that the portals have given the consumer a better experience there; the portals have meant that the estate agency experience is less interesting because I’ve come to talk to you to see what you’ve got and you’ve got far less than if I’ve spent some time on the portal, so I’m not going to bother coming in again. I’ll trust the portal to tell me all the information in one place. It’s become much easier, as a buyer, to be estate agency agnostic and just find a property with whichever estate agent has got it up for sale. It doesn’t really matter; it’s the property that you want. It’s much easier to select that property and go through that transaction without visiting a physical location and without interacting with the estate agent at all.

You mentioned the agency fees have increased since the 90s to today. What was the structure back then?

It’s partly increased because the average property price has gone up. If I back to my traditional high street days in the 90s, typical commission would have been 1.75%, subject to a minimum fee of £1,200. We were probably getting £1,500 per transaction, with an average property price of maybe £100,000. Back then, I was in the Midlands, so that average property price back in the 90s meant that, actually, the available revenue to estate agency was very different to today.